Don’t Invest In Your Employer
February 19th, 2007 | Published in Asset Allocation
If you have a choice, as many people do, of where to put your retirement assets, I recommend not investing it at all with your employer. Other places may recommend that you don’t put all of your retirement eggs in your employer’s basket, but I go one step further and say that you shouldn’t put any of your money with your employer. Why? I’ll get into that after we go over why the typical investment allocation advice.
Why Not All In One?
Sure, you’ve seen the numbers of how rich someone would’ve been if they invested $1,000 in Microsoft when it went public, so why not put your faith with an investment you have some control in, since you work there, and slam all your assets into your company’s stock? You can give yourself incentive and you can give yourself a good reason to work hard right? Yes, you would! Except that’s a terrible idea from an investment perspective because you never put all your eggs in one basket, that’s why the adage exists. For every one guy who bet it all on black, there are thousands that put it on red and lost it all.
Okay, not full tilt, but why not a little investment in my company?
The reason is because you’re working for them and that’s enough risk already. Let’s say things go well and you don’t invest with your company, you still have your job, which is paying you, and you still have your investments in something else, which may not appreciate as well as your company did but probably performed admirably. Let’s say you get fired and it’s because the future of your company looks bleak. Now, not only do you not have a paycheck, your investments have gone down. Just as there are plenty of fish in the sea, there are plenty of investments in the market and you can pick one you don’t have such a tightly coupled interest in.
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